Bonds fall on inflation, weaker currency

Bonds fall on inflation, weaker currency

Shamim Adam, Bloomberg/Singapore

Indonesia's four-year bonds fell for a fifth day as concern about accelerating inflation and a weaker currency led some investors to sell the securities.

The rupiah last week had its biggest slide since August. Bank Indonesia, the central bank, has raised its benchmark interest rate six times since August to stem rising consumer prices. Indonesian bonds are poised for the first annual decline since at least 2001, according to an index compiled by HSBC Holdings Plc.

"People are still concerned about the outlook for inflation next year and the weakening rupiah is adding to further uncertainties for bondholders," said Donsyah Yudistira, a fixed- income analyst at PT Mandiri Sekuritas in Jakarta.

The yield on the 14 percent bond due in June 2009, one of the most-traded securities, rose 1 basis point, or 0.01 percentage point, to 13.27 percent as of 5:10 p.m. local time, according to the Inter Dealer Market Association in Jakarta.

The price of the bond fell 0.024, or Rp 240 per Rp 1 million face amount, to 102.984. Prices move inversely to yields.

Investors in Indonesian bonds have lost 1.8 percent this year, the worst performance among HSBC's Asian government bond indexes.

Inflation reached a six-year high of to 18.4 percent in November. Inflation is unlikely to slow until the third quarter of next year and will "still be double digit," Bank Indonesia's Senior Deputy Governor Miranda Goeltom said on Dec. 2.